Russian Forestry and Wood Supply Operations Analysis

PRIORITY INVESTMENT PROJECTS Volume of Investment, million Rubles. Investor / Name of Project / City Incl. Total Borrowed Funds Volume of the consumed raw material, th m³ Allowable cut size, thsd. m³ Types of Products and Annual Production Volumes Imployment impact (number of man) Period of Construction Payback Period, Number of Years 300.2 262.6 104.8 101.8 Wood panel houses - 10 thsd m² Joisted floors 4.8 thsd m³ 2008-2011 176 6.7 (started in 2010) Permsky DSK Perm Modernization of house-building production No information Perm Plywood Mill (renamed to SVEZA-Uralskiy in the beginning 2015) Uralskiy Laminated plywood - 30 thsd m³ Chipboard - 24.2 thsd m³ 1,016.2 173.3 173.3 Laminated chipboard - 24.2 thsd m³ Reconstruction of plywood production Sawn timber - 26.2 thsd m³ Owned by SVEZA Group. It is planned to continue modernization with a 5-7 billion rubles cost, in order to increase volume of plywood production up to 250,000 m³ per annum Solikamskbumprom ⚫ Solikamsk Modernization of the line for fiber and paper production 12,658.4 8,501.5 1,300 682.4 Newsprint - increase of production on 410 thsd t-up to 950 thsd t 539 2008-2018 10 Building of a new technological line No information Uralbumaga • Perm Modernization of paper machine B-21, modernization of cardboard machine KP-06 and organization of logging sites No information The project is underway 3,348 2,551 1,500 1,336.2 Fluting paper - 1,020 thsd t 214 2009-2020 3.2 Volume of Investor / Name of Project / City Investment, million Rubles. Incl. Total Borrowed Volume of the consumed raw material material, th m³ Allowable cut size, thsd. m³ Funds SIBERIAN FEDERAL DISTRICT REPUBLIC OF BURYATIA PRIORITY INVESTMENT PROJECTS Types of Products and Annual Production Volumes Imployment impact (number of man) Period of Construction Payback Period, 144 2007-2015 8.1 Baikal Forestry Company ⚫ Eravninsky district Organization of objects for forestry and timber-processing infrastructure Sawn timber - 150 thsd m³ 1,520.1 1,520.1 272.2 426 Technological wood chips - 83,2 thsd m³ Pellets 431 2008-2013 5.2 Creditor - Sberbank. In 2013 Mitsui & Co., Ltd. (Japan) invested 1 billion rubles in the project Lesnaya Birzha Zaigraevskiy district 4,600 No info No info 276.7 OSB plant construction (Baikal DOK) OSB - 236 thsd m³ Profiles 257 2011-2019 Sawn Goods "Red October" • Perm Development of logging infrastructure and wood-sawing production 800 No info 240 500 Sawn timber-240 thsd m³ No info 2012-2013 7 Is owned by Linwood Trading Limited, Cyprus. A new wood-sawing complex was set into operation in September 2013 Osentsovsky DOK • Perm Glued constructions from wood - 18 thsd m³ Moulded strips - 10 thsd m³ Modernization of production and development of forests "Novaya Glubina" 331.9 No info 92.3 No info Workpiecess for pallets Pellets 9.5 thsd t 40 Since 2012 No info Technological wood chips The foundation stone on the construction site was laid in 2013, although the building has not been started. The shareholders changed, and now 57% of the company is owned by a Swiss company. It was announced about the authority's intention to terminate a land lease agreement Forestinvest ⚫ Severo-Baikalsk 404 376.8 200 203 Sawn timber -120 thsd m³ Wood-plastic composite boards - 2-3 thsd m³ 269 2011-2017 7 Pellets 100 thsd m³ Organization of forestry and timber-processing infrastructure Wood-sawing was started in 2013, although the project was behind schedule. In summer 2014 a timber-processing complex and multiple sawing equipment were set into operation, a housing settlement for forestry shift workers was organized. About 35 million rubles were invested in the project in 2013 Selenginsky CKK • Kabansky district Modernization of cardboard production 330 Tare cardboard No info No info 215 Fluting cardboard Paper bags and packs 2000 No info No info In winter 2013-2014 the mill was stopped. On the brink of bankruptcy, it was purchased by 000 Bail. A new owner is going to invest 5.2 billion rubles in plant modernization and increase cardboard production twofold TRANS-BAIKAL KRAI TSPK Polyarnaya Mogochinsky district, Amazar Creation of timber processing complex 22,000 No info No info No info Unbleached pulp - 400 thsd t 3249 2005-2016 No info A wood-sawing plant, capable of producing 100,000 m³ of raw materials, was set in operation in 2012. The project was stopped because of protests by local residents, but recently building works have been continued. Round timber is exported to China. In January 2014 the previously closed border crossing point nearby was opened again. The simplest wood-sawing workshop is in operation Swiss Krono Rus Krasnokamsky district OSB plant 10,440 No info No info No info OSB-600 thsd m³ and more A plot of land was bought, and the land area was prepared. The project received a positive State expert review. It is planned to start the first phase at the close of 2015. However, at the beginning of 2015 information about the closure of the project appeared No info 2015-2018 No info LDK Igirma Nizhneilimsky district, Novaya Igirma Wood-sawing and timber-processing complex IRKUTSK OBLAST 3,000 2,100 1,000 413 Sawn timber-434 thsd m³ 1000 2008-2009 (started in 2011) 5 310 310 URAL FEDERAL DISTRICT SVERDLOVSK OBLAST Viyskiy DOK Nizhniy Tagil 2006-2008 789.7 709.3 250 391 Furniture boards and other untis - 27.4 thsd m³ 600 6.5 Woodworking plant with the own logging (started in 2009) In 2011 the closure of the project was announced ArgusSFK Serovskiy district Woodworking plant with the own logging Creditor - Sberbank Is part of the 'Russian Forestry Group'. In 2013 the production of briquettes started. The start of pellet production is planned of 95,000 per year Ilim Group Ust-Ilimsk 18,700 Investment project for forestry development Market pulp - 1,270 thsd t 11,000 7,147.5 Cardboard - 250 thsd t Paper - 120 thsd t 250 2008-2014 7.6 Production of softwood pulp was started in 2013 Trans-Siberian Forestry Company ⚫Irkutsk Sawn timber - 154 thsd m³ 600 600 800 Plywood 30 thsd m³ 2008-2010 (started in 2011) Wood-sawing and woodworking complex 2.8 Sawn timber - 500 thsd m³ Wood constructions - 94 thsd m³ Wood houses - 122 thsd m² 5,887 2,943.5 1,971 1,971 861 2008-2012 5 Glued beams 100 thsd m³ OSB 300 thsd m³ Fuel granules 160 thsd t Ural-Siberian Investments Nizhniy Tagil Logging - 800 thsd m³ Sawn timber production is in process. In February 2015 the purchase of Hekotek equipment for pellet production was announced Rusforest Magistralny Kazachinsko-Lensky district Dry sawn timber - 150 thsd m³ Organization and modernization of logging and wood-working objects Sawn timber - 246,13 thsd m³ No info No info No info 599.7 1,127 1,127 800 800 699 2009-2013 7 Chipboards 150 thsd m³ Timber-processing plant for dry sawn timber production Technological wood chips 541 541 Started in 2011 No info Pellets - 26,8 thsd t Eurasia-Lesprom Group (Far Eeastern Corporation of the Forestry 609 The plant is being built. The Federal Forestry Agency accused regional authorities of halting the project - they left the plant without a raw material base Lesnikov Serovskiy district, Krasnoglinniy settlement Timber-processing production with the own logging The project is underway 525 No info No info No info Timber products - 200 thsd m³ No info До 2018 No info Industry, China) • Magistralny 2,000 No info to other (1,130 thsd Dry sawn timber - 400 thsd m³ 1,000 m³ according Workpieces for fumiture production 208 No info No info Timber-processing complex data) In 2011 the end of the construction works of the wood-sawing plant, capable of producing 400,000 m³ of sawn timber per annum was announced. At the end of 2011 the project received the status of priority project. In 2014 it was announced: "it has been decided to increase production and to increase investment capital in the project. The main areas are the continued development of woodworking, woodworking output production, and disposal of wastes" PKF Les Kurgan Woodworking plant with the own logging KURGAN OBLAST Sawn timber - 24,6 thsd m³ Furniture boards - 6 thsd m³ 458.2 371.4 100 100 Glued timber-12 thsd m³ Sets of houses-150 pieces 315 million rubles were invested in timber-processing facilities. There is no information about the processing plant startup. The plant is the main supplier of the wood-working plant Dasko (Kurgan) 247 2008-2011 7 TYUMEN OBLAST Tyumen Plywood Plant • Tyumen 1,218 738.7 664.2 664.2 Oversize plywood - 120 thsd m³ 576 2009-2015 6.9 Oversize plywood plant The second plywood line was set in operation in 2013. The third step is planned for 2015 Zagros Zavodoukovskiy district 350 No info No info Zavodoukovskiy forestry complex Softwood and hardwood sawn timber. Profiled 178 timber. Round logs. Pallets. Seeds, and planting stock. Firewood. Fuel wood chips No info 2012-2016 No info Increase of production facilities. In 2013 a blank workshop of 30,000 m³ capacity for pallet production was opened 74 #6 (2015) RUSSIAN FORESTRY Company Gosstroy ⚫Irkutsk district, Khomutovo Timber-processing production Kraslesinvest Boguchany Timber-processing complex 1,530 No info No info No info Glued timber - 50 thsd m³ The plant was set in operation at the end of 2009. In 2012 the company underwent bankruptcy proceedings because of the overdue dept to Sberbank to the amount of 1.1 billion rubles. It is possible that after that the owner of the concern changed. In 2014 the project received priority status, and the company got 20,951 million rubles to cover loans No info 2008-2010 5 KRASNOYARSK KRAI Bleached softwood kraft-pulp - 850 thsd t Kraft-liner 500 thsd t 73,250 73,250 5,000 7,670.4 Soft sawn timber - 700 thsd m³ MDF 250 thsd m³ Glued beam, veneer 2600 2008-2014 9 The project is known as Boguchansky LPK. The first line was set into oepration officially in 2014. Credit funds from Vnesheconombank to the amount of 43 billion rubles were loaned. The company inaugurated the first line in autumn 2014, although in fact industrial production was not started, and the forest was subleased. Due to the wrong estimation of wood stocks on the forestry sites, it was announced in the beginning of 2013 about the termination of paper mill construction works. In February 2015 the former general contractor 000 SP Arkaim submitted to the arbitral tribunal of the Krasnoyarsk Territory a petition about the recovery of 915.4 million rubles from the project investor ZAO Kraslesinvest. The company submits that the fulfilled works still have not been paid. In its tum, Kraslesinvest has filed a claim at Arkaim for the sum of 7.3 billion rubles RUSSIAN #6 (2015) 75 FORESTRY Number of Years